ConsenSys founder Joseph Lubin is responding to employee complaints about how shares in the ethereum venture studio are doled out, sources say.
A new security token platform has launched with backing from Singapore stock exchange SGX and technical help from ConsenSys.
Oxfam issued tap-and-pay cards loaded with $50 worth of DAI to 200 Vanuatu citizens to use via Sempo’s payment platform, following six weeks of direct consultation with villagers.
Throughout May 2019, United Kingdom-based nonprofit organization Oxfam International executed a month-long trial that saw MakerDAO’s DAI stablecoin distributed as a means of exchange among citizens of Vanuatu. The Oxfam initiative, named UnBlocked Cash, was conducted in partnership with MakerDAO, ConsenSys and Australian tech startup Sempo. The Australian government also supported the program.
Tsunamis, cyclones and volcanic eruptions comprise a constant concern for the citizens of Vanuatu, with WorldRiskReport describing it as the world’s most at-risk nation to natural disaster for five consecutive years. The month-long program saw 200 residents of the Vanuatu villages of Pango and Mele Maat issued tap-and-pay cards loaded with roughly 4,000 Vanuatu vatu (approximately $50) worth of MakerDao’s DAI stablecoin.
Local vendors who agreed to participate in UnBlocked Cash were provided with Android smartphones with an app facilitating the processing of DAI payments. The vendors were also able to convert DAI into fiat currency through Sempo‘s cryptocurrency exchange or any other platform, if desired. In total, 34 vendors participated in UnBlocked Cash, including local stores and schools.
Approximately 2,000 transactions were recorded during the pilot. Due to privacy concerns, an individual’s purchases were not tracked. However, the program recorded the general category of purchases — such as “medicine,” “food” or “bills.” During May, 5% of all new DAI addresses were created by the citizens of Vanuatu.
Cash trumps in-kind provisions
According to Australian media outlet Micky, contemporary research indicates that providing aid in the form of a liquid means of exchange is significantly more effective than giving in-kind support, such as food and other basic provisions.
The publication approximates that roughly “70 percent of Syrian refugees have been forced to sell in-kind donations for cash so they can buy the items that actually need to suit their personal circumstances.” The provision of cash also serves to encourage local economic activity.
Sandra Uwantege Hart, the head of Oxfam’s Pacific Cash & Livelihoods in Vanuatu, told Cointelegraph that “Oxfam was already managing a portfolio of activities designed to scale cash transfers as a means of delivering disaster assistance across the Pacific region” as early as 2017. She continued:
“Typically, cash transfers are much more efficient than providing goods as a form of aid relief, but they are also slow to set up and often bogged down by lengthy financial reconciliation processes and slow monitoring and reporting, which is often difficult for donors to verify. We saw the potential for higher transparency, rapid analytics and automated transaction tracking typical of blockchain solutions as a vehicle to improve and accelerate our cash transfer programs and ultimately make them more responsive to people’s needs.”
According to Hart, it took Oxfam “a while to find the right tech provider to get this solution off the ground before settling on Sempo through an RFP process. Sempo stood out from the pack as one of the only tech providers who fully understood both sides of the equation we were trying to solve — how cash transfers work, and how to design blockchain solutions in a local context-adapted way to make them work for the people who need them the most.”
Sempo’s platform operates offline
Speaking to Cointelegraph, Sempo’s Melanie Hardman described that the platform’s mission is to solve the challenges encountered by both vendors and customers who seek to conduct trade in periods of crisis. Hardman said:
“Our platform consists of: an app used by vendors as a ‘point of sale’ platform, an e-voucher or ‘tap and go’ card which hold a balance of funds and is used by recipients to make purchases, and a dashboard managed by the Oxfam team, where they can enroll and approve program participants, disburse funds and monitor transactions.”
The platform is able to continue operating offline by “cryptographically recording recipient’s balances on tap-to-pay smart cards, which are then synced at a later point.” The platform also does not require recipients to have access to a mobile phone and does not require users to undergo Know Your Customer (KYC) identification checks, which Hardman described as “critical,” given that many people living in the developing world lack identity documentation.
In late 2018, Sempo used its platform to deliver cash aid to refugees based in the Greek city of Athens, Iraqi Kurdistan, as well as Beirut and Akkar in Lebanon. According to Sempo, the programs saw the “creation of a digital credit transfer platform that is easy for both vendors and recipients to use, regardless of literacy and existing levels of financial inclusion.” The company also noted that it was able to increase the transparency of the program by leveraging distributed ledger technology.
Stablecoin issuance as cash aid
Sempo’s Nick Williams told Cointelegraph that MakerDAO and Sempo developed a process for UnBlocked Cash that distributed DAI-backed digital vouchers, which were redeemable for fiat currency, to Vanuatu citizens.
“Dai was used as collateral for a special e-voucher, which means that vendors can be reimbursed by anyone who meets the regulatory requirements of the Vanuatu Government. This gives the platform capacity for much lower cost overheads, as well as creating the foundations for open financial ecosystems in the communities that need them.”
Greg DiPrisco, head of business development for the Maker Foundation, told Cointelegraph that “Sempo was convinced that Dai was the best solution for their needs and thus went through the proper channels to ensure that they could use it in the pilot.” DiPrisco described the initiative as “a testament to the power of a decentralized stablecoin to empower disenfranchised populations.”
Sempo’s Hardman stated that the company was selected by Oxfam to provide its cash transfer platform technology for the Unblocked Cash pilot following year-long discussions between the two entities regarding “the potential to revolutionize the cash transfer space using blockchain.” Hardman continued:
“Sempo was invited to put forward a proposal by Oxfam as part of their RFP process. This involved Sempo presenting an initial presentation on our work to date, and then developing and submitting a proposal, which we did in partnership with ConsenSys.”
Claudio Lisco, strategic initiatives lead at ConsenSys, told Cointelegraph that the company was engaged by Oxfam alongside Sempo “to assess the time, cost and quality of digital cash based transfer programs” after the nonprofit became aware that ConsenSys had built a financial inclusion platform in conjunction with the Union Bank of the Philippines, titled Project i2i. Lisco stated:
“ConsenSys aided in the initial design of the pilot, provided blockchain advisory and communications support, and evaluated the pilot to make recommendations for future utilization and scaling potential. We were on the ground during the pilot, to document and collect data insights, and conducted interviews and filming. We are now producing the debrief report, video case study, and advising on future developments and how iterations of the cash transfer program can be scaled.”
Pilot program seen as success
While Sempo and ConsenSys will meet with Oxfam during the final week of June to discuss the pilot’s findings — and whether there is potential to employ the program at scale in Vanuatu and other regions — representatives of the entities involved indicate that the program was seen as a success.
Oxfam’s Hart stated that Oxfam’s previous cash assistance programs in Vanuatu involved a setup process that “took between 30 minutes and an hour of long lines and verifying paper lists.” According to Sempo’s Hardman:
“Within the pilot, enrolment times were reduced between communities from 5.4 minutes to 3.6 minutes, demonstrating significant time savings when compared with other cash transfer modalities, where recipients may have to attend a registration session, return at another time to verify their identity, and then travel to collect a cheque.”
Hart concluded that there were significant gains in the speed with which Oxfam was able to pay vendors, emphasizing meaningful participation on the part of many small, community-level merchants, who rarely take part in assistance programs due to typically being unable to wait weeks to be paid. Hart explained:
“Now, with weekly payments, virtually all vendors in this trial were small scale and community based, and located within walking distance for most recipients — this means that we are enabling small-scale community economic recovery that is more inclusive and better adapted to people’s purchasing habits.”
Pilot program produces “unprecedented” transparency
Transparency has long comprised a fundamental value proposition put forward by cryptocurrency, with the UnBlocked Cash pilot demonstrating the advantages digital currencies offer over opaque means for distributing public finance. Hardman stated that the initiative “provided high levels of transparency for Oxfam and their donor, the Australian Government, as administrators were able to see transaction data in real time both on the Sempo dashboard, and the public blockchain.”
Hardman also reported that Vanuatu community members indicated that Sempo’s platform would be the preferred modality of aid issuance in future disaster scenarios, attributing such to the greater ease of use afforded to recipients when compared with other forms of cash aid. However, she also noted, on reflection, that Sempo would like to see the platform’s offline data reporting functionality strengthened in order to improve monitoring.
ConsenSys’ Lisco described the program as showcasing the unique value propositions of cryptocurrency technology, concluding that Sempo’s platform offered significant efficiency advantages over cash, checks and other traditional methods for distributing financial aid. He continued:
“The pilot demonstrated that direct donations (without any intermediaries or administration) are possible utilizing Ethereum-based stablecoins. This method of transfer was also significantly cheaper for small donations. For instance, bank transfers to Vanuatu from Australia cost approximately $20 AUD. An Ethereum transaction, by contrast, averages less than 10 cents in AUD.“
Oxfam “highly likely” to continuing using stablecoins to distribute aid
Moving forward, Hart indicated that Oxfam is currently in the process of compiling reports aimed at showcasing the UnBlocked Cash initiative, and that it will “seek out the resources to be able to plan longer-term, and look at how we scale up this innovation in the Pacific, and elsewhere.”
Joshua Hallwright, Oxfam Australia’s humanitarian lead, told Cointelegraph that it is “highly likely that Oxfam will use stablecoins or other distributed ledger technologies to provide cash aid in disaster responses in the future, either in Vanuatu or elsewhere.”
Hallwright noted that “Oxfam is exploring the use of distributed ledger technologies because of their potential to change power dynamics and address inequities,” adding:
“As DLTs become ever more present in society, Oxfam is engaging in their development and impact in line with our goals of eliminating poverty and reducing inequalities. Oxfam is currently piloting six different uses of DLTs, globally, and sees these pilots as producing important insights that will shape future DLT applications in crisis responses and more broadly in emerging economies.”
The program showcases the potential of cryptocurrencies to facilitate far greater efficiency in the provision of resources, especially within the developing world and in response to crisis formulation. It is also good to hear that more such trials may take place, which could lead to a wide-scale adoption of crypto in the disaster relief sector.
ID startup 3Box is spinning out of ethereum incubator ConsenSys with $2.5 million in new funding.
Oxfam has partnered with Australian tech startup Sempo and blockchain company ConsenSys to test stablecoin Dai’s ability to provide aid in regions struck by natural disasters.
International charity organization Oxfam has partnered with Australian tech startup Sempo and blockchain company ConsenSys to test stablecoin Dai’s (DAI) suitability for aid in regions suffering from natural disasters, local news outlet Micky reported on June 17.
The parties launched a philanthropic initiative dubbed UnBlocked Cash with the support of the Australian Government. To test the system, Sempo and Oxfam chose purportedly the world’s most natural disaster-prone country, Vanuatu.
During the trial, 200 residents of the island Efate were given tap and pay cards containing around 400 vatu each ($50 at press time) connected to an Ethereum (ETH) address credited by Oxfam with $50 worth of Dai. 34 local vendors were provided with Android smartphones to be able to accept payments.
Sempo co-founder Nick Williams claimed that this is the first time a non-governmental organization (NGO) has used a stablecoin to provide ain anywhere, and also said that this is not a one-off pilot as the company believes that stablecoins can completely change the way of aid delivery. Sandra Hart, the Unblocked Project lead at Oxfam in Vanuatu, said:
“For the first time ever, thanks to the use of a stablecoin, we now have end-to-end transparency, ensuring that the people who receive funds are the ones that need it. It’s a game changer for Oxfam that ultimately makes our work easier and more effective.”
Last November, Oxfam launched its BlocRice blockchain supply chain solution for rice. BlocRice, which aims to use smart contracts to provide transparency and security between rice growers in Cambodia and purchasers in the Netherlands, has been under development and should purportedly expand to 5,000 farms by 2022.
At press time, Dai — which is pegged to the United States dollar — is ranked 87th on CoinMarketCap’s list of cryptocurrencies. Dai is currently trading at $1, having gained 0.54% over the past day. The stablecoin’s market capitalization is around $85.6 million, while its daily trading volume is around $19.8 million as of press time.
In a European first, the ConsenSys-backed Monerium has received approval to run fiat over a blockchain as a regulated form of payment.
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Luxury goods manufacturers turn to blockchain.
Although once confined largely to agriculture, blockchain technology is now making major inroads into the luxury goods supply chain market.
Luxury brands trial blockchain
Although many products in the luxury goods market are renowned status symbols found in expensive city center stores the world over, the components of their products can originate in the most far-flung corners of the globe. The nature of globalized trade means that raw materials can be sourced in one continent, collected and assembled in another, and then shipped on to be sold in any of the world’s major cities. Global shipping networks and rapidly advancing technology present ample opportunities for business and profit. However, the nature of globalized trade can often result in a creaking supply chain and dubious ethical practice when it comes to sourcing and producing the materials needed for luxury goods. As customers become more and more concerned with the ethical origins of their products and companies seek to create sustainable and profitable business models, blockchain technology is increasingly being seen as a solution to suit all parties involved.
The new platform developed by LMVH and Microsoft, named Aura, is based on the Ethereum blockchain and will use Microsoft Azure. Consensys worked on the design and development of the Traceability Smart Contracts on the project as well as the blockchain infrastructure. As per the press release, Aura is a “permissioned consortium network with privacy, based on Quorum.”
The press release states that several companies under the LMVH Group umbrella, such as Louis Vuitton and Parfums Christian Dior, are already involved in the project. Customers will be able to access a wealth of information about the origins and components of the product, taking into account ethical and environmental data, details about how to care of the product, along with general information regarding after-sale warranty services. The press release added:
“AURA makes it possible for consumers to access the product history and proof of authenticity of luxury goods — from raw materials to the point of sale, all the way to second-hand markets.”
Although the world of luxury fashion is as competitive as any other market, the team behind Aura hopes that it will bring about more cooperation within the industry. Ken Timsit, the managing director of Consensys Solutions, outlined his hope that the project would bring benefits to the luxury industry as a whole:
“AURA is a groundbreaking innovation for the luxury industry. ConsenSys is proud to contribute and to work with LVMH on an initiative that will serve the entire luxury industry, protecting the interests, integrity, and privacy of each brand, leveraging Ethereum blockchain technology in a truly decentralized way.”
Although Louis Vuitton’s relationship with blockchain reportedly spans three years to date, other luxury brands are already experimenting with the technology to help streamline their supply chains. Alyx, a luxury brand created by New York-based creative director Matthew Williams, is pairing up with the German blockchain foundation Iota in order to create a more ethically transparent supply chain.
In partnership with Iota and global manufacturing company Avery Dennison, Alyx plans to offer customers a comprehensive insight into the full extent of its supply chain. Customers seeking to find out more about their purchases will be able to scan a QR code, giving them access to data covering the product’s first stitch to point of sale.
As brands the world over are feeling the pressure to be more transparent about the way in which their materials are sourced and their products produced, Alyx is clearly seeking to assuage any doubts customers could have regarding its products. Debbie Shakespeare, senior director of sustainability and compliance at Avery Dennison, reportedly said:
“Brands and consumers can know that the information they are being shown about the garment’s creation process is 100% accurate and can be trusted implicitly.”
The decision to host supply information via the use of blockchain technology is the latest in the company’s short yet committed history of sustainability. Creative Director Matthew Williams told fashion news outlet GQ that the company’s other efforts to increase sustainability include using recycled materials and a leather-dying process, which had a smaller carbon footprint. Williams gave an outline for when consumers can expect the initiative to be launched:
“We’re taking it a step further: we’re going to be the first brand to introduce blockchain technology this month in Copenhagen. We’re doing a blockchain prototype that shows the raw material to the finished garment. Our brand is about evolution not revolution, so we work on making the things we do better”
From agriculture to high-end fashion, it seems that companies are finding solutions in blockchain. Cointelegraph spoke to two experts from the World Economic Forum, a nonprofit international organization that seeks to increase public-private cooperation, to learn how blockchain is being implemented in supply chains across the world. Nadia Hewett, lead for blockchain and distributed ledger technology (DLT) at the World Economic Forum, explained that traceability and streamlining present real benefits for companies with complex supply chain structures:
“Currently, the supply chain industry is fragmented, with parties adopting a siloed approach. Blockchain and distributed ledger technology could bring standardization and transparency. Due to an increasing demand from customers for the proof of legitimacy and authenticity of the products they purchase, there is a strong interest in the deployment of blockchain for product provenance, often referred to as pedigree. In general, blockchain has features that can help trace a product’s digital footprint. The fact that the data is timestamped (tamper-proof) provides a single source of data integrity and allows users to retrieve a full history of activities.”
Hewett added that blockchain technology presents unique advantages for large, multinational companies seeking to both streamline and tighten security over their supply chains:
“A blockchain-based platform can support the digitization of paper-based documentation, and establish an immutable, shared record of all transactions among network participants in near real time. In this sense, blockchains are ideally suited to large networks of disparate parties and are a solution to making the complexity of global supply chains much more manageable. Secure data-sharing and, specifically, smart contracts are another aspect of blockchain technology that allows for increased automation and efficiency through avoidance or redundant data entry, acceleration of transaction execution and reduction of errors and misunderstandings.”
Although international business is fiercely competitive, the blockchain industry represents a rare environment in which companies realize that collaboration can be in their interest. In 2018, international food giants Nestle, Unilever, Walmart and Dole partnered with IBM to create the Food Trust, a blockchain system based on the idea that partners and competitors should collaborate and keep a single-record system.
The most recent addition to the Food Trust is the Ecuador-based Sustainable Shrimp Partnership (SSP), according to a press release on May 6. The rationale behind the Food Trust is that failure to cooperate could create huge quantities of unmanageable data, due to the multitude of parties involved in the extent of the companies’ supply chains and could improve the overall quality and safety of the products the companies provide.
Sumedha Deshmukh, a project specialist for blockchain and DLT at the World Economic Forum, said that their current blockchain projects witness collaboration efforts from a diverse range of industries and sectors:
“We have assembled organizations from across all supply chain functions, cutting edge blockchain companies and key members of civil society in our project community. They are collaborating to shape the deployment of blockchain for supply chains towards interoperability, inclusivity, and integrity.
“They know blockchain and distributed ledger technology is coming, whether the industry likes it or not. An inclusive and multi-stakeholder approach that takes the entire system into consideration is good for all players. Given the nature of the technology, organizations are understanding that blockchain is a team sport — its benefits are maximized through collaboration. Moreover, there seems to be an understanding that collaboration is critical in thinking through any potential unintended consequences and minimizing the risks associated with its deployment.”
Whiskey whets its whistle with blockchain
Blockchain’s more recent supply chain activity has expanded from high-end fashion to another of life’s luxuries: whisky. On March 26, premium Scotch whisky Ailsa Bay became the latest brand to be tracked with a blockchain-based system, according to the liquor-related news website the Drinks Business.
Ailsa Bay’s introduction of blockchain tracking is a move intended to tackle liquor counterfeiting in the United Kingdom, something a separate report by the Drinks Business claims loses the U.K. around 218 million British pounds (over $288 million) a year. The partnership is formed by William Grant & Sons, the owner of Ailsa Bay, and blockchain company Arc-Net, which will develop the system to track the products’ journey from distillery to store. The information will also be used to collate data from customers, using mobile services to establish where the whisky is being purchased.
Another company to integrate blockchain into its supply chain is the highland Scotch whisky distillery Ardnamurchan. In 2017, the company also announced a partnership with Arc-Net to introduce a scannable QR code for its products, in an effort to increase transparency about how the whisky is produced.
Alex Bruce, the managing director of Adelphi — the owner and operator of Ardnamurchan Distillery — expressed his hope that this latest measure would bring the Scotch whisky industry into the 21st century:
“We have a vision for the future and using the platform is an integral component in our ability to capture and share production, process and product data with our customers, simply by scanning a QR code on the bottle. In addition to a growing number of countries, globally, recognising Scotch whisky’s Geographical Indication, we also believe it to be essential that the consumer is able to understand the craftsmanship of making it, and for the producer to ensure the security of their route to market. In addition, the Arc-Net platform will give us the opportunity, as a nascent distiller, to share and communicate our love for the brand and ensure our customers have the ability to visualise and validate our products as they move across the globe.”
Kieran Kelly, CEO of Arc-Net, expressed his excitement about working with Adelphi and the prospect of modernizing the Scotch whisky market:
“Blockchain enables a new era of transparency and product authentication. It’s a fantastic opportunity to work with such a forward-thinking company like Adelphi. Alex and his team are pushing the envelope of spirit and whisky production in terms of quality and traceability, and also demonstrating a realistic and pioneering approach to renewable energy and sustainability, and Arc-Net is delighted to be a part of their brand story.”
Gartner survey finds damning results for blockchain solutions
Despite the latest wave of companies turning to blockchain, a technology survey of user wants and needs conducted by Gartner reported that only 19% of businesses rated the technology as important for their businesses, according to a press release published on the company website on May 7.
Gartner, which refers to itself as the world’s leading research and advisory company on its website, states that, in addition to the 19% that see blockchain as important for their business, only 9% have actually invested in the technology. The survey found that, although blockchain enjoys popular support, it sees 90% of blockchain initiatives within the sector suffering from “blockchain fatigue” by 2023. The company said that blockchain projects are currently very limited and “do not match the initial enthusiasm for the technology’s application in supply chain management.”
Alex Pradhan, a senior principal research analyst at Gartner, mentioned that blockchain projects have mostly focused on traceability, authenticity and trust, and outlined her view that more emphasis should be place on technological capacity and standards:
“Most have remained pilot projects due to a combination of technology immaturity, lack of standards, overly ambitious scope and a misunderstanding of how blockchain could, or should, actually help the supply chain. Inevitably, this is causing the market to experience blockchain fatigue.”
The findings of the report indicated that the fledgling nature of the blockchain industry means that it is hard for projects to focus on high-value use cases and that the vendor ecosystem “is not fully formed and is struggling to establish market dominance.”
Pradhan said that the cumulative effect of the current developmental stage of blockchain projects and less-than-enthusiastic market prospects means that the solutions offered are not suitable for scale of the issues they are supposed to solve:
“Without a vibrant market for commercial blockchain applications, the majority of companies do not know how to evaluate, assess and benchmark solutions, especially as the market landscape rapidly evolves. Furthermore, current creations offered by solution providers are complicated hybrids of conventional blockchain technologies. This adds more complexity and confusion, making it that much harder for companies to identify appropriate supply chain use cases.”
Pradhan added that organizations should not rush into adopting blockchain solutions:
“The emphasis should be on proof of concept, experimentation and limited-scope initiatives that deliver lessons, rather than high-cost, high-risk, strategic business value.”
Despite the gloomy findings of Gartner’s report, both Hewett and Deshmukh are confident about the potential for blockchain to bring solutions to the supply chain industry. When asked whether blockchain simply represents another solution looking for a problem, Hewett responded:
“The past two years saw a lot of enthusiasm around blockchain in the supply-chain space. It is these high expectations that brought the blockchain topic to the board agenda — and, in many ways, this has opened the door to discussing various supply-chain system standardization issues that have long been lacking in the industry. There is also much misunderstanding and confusion about the technology in the trade and logistic spaces.”
Deshmukh said that, although there are obvious benefits for supply chains, organizations need to focus on specific issues:
“Organizations have to cut through the hype to find how it can solve a specific problem. What the Blockchain for Supply Chains project is trying to do is help decision makers cut through the hype with a framework to guide them towards interoperability and integrity in blockchain deployment. Blockchain technology can help solve some major issues in the industry. But, it is not one size fits all.”
Despite the many hurdles faced by blockchain projects that aim to make an impact on the supply chain industry, Deshmukh added that the willingness of companies to experiment with them validates their purpose:
“Supply chains have been an area ripe for blockchain experimentation because it addresses many of the pain points within the global supply chain — the volume of experimentation and interest seems to validate this. Supply chain actors are looking into a wide array of use cases ranging from product provenance and traceability to streamlining global operations.”
Andrew Keys is moving to DARMA Capital, where he intends to help investors generate returns on their ethereum and bitcoin holdings.
ConsenSys’ Joseph Lubin says Ethereum is already scaling and that Ethereum 2.0 is set to launch within two years.
Joseph Lubin could arguably be seen as a star at any blockchain event these days, but at the Ethereal Summit last month — organized by Ethereum-focused development company ConsenSys, which he co-founded — he was especially revered.
While inside the conference space, the co-founder of Ethereum was either listening intently to what was happening on stage or surrounded by a group of people between panels. Nevertheless, he found some time to speak with us during the two-day event.
So, on a sunny Saturday, we sat down on a quaint cast-iron bench in the garden area of the Brooklyn venue, Pioneer Works.
Lubin spoke about the current technical capacity of Ethereum and what awaits the ecosystem in the near future. Our conversation touched on scalability, consensus protocols and public vs. private blockchains for businesses looking to integrate the technology.
This interview has been edited and condensed.
Can Ethereum scale?
Olivia Capozzalo: Yesterday, Jing from Plasma Group spoke very enthusiastically about Ethereum’s ability to scale. Can you comment on that? Can Ethereum scale? And if so, what are the main developments right now in the ecosystem that are making that happen?
Joseph Lubin: So, I think the point, as she punctuated that panel quite brilliantly and entertainingly, was not so much about its ability to scale, it’s that it has already scaled quite significantly.
So, she’s part of the Plasma Group. It’s a group that is pioneering a class of different solutions for scalability. Essentially, recognizing that we have this base trust layer that can handle 15 to 27 transactions per second. And above that we have state channels of various different varieties in zk-STARKs and in zk-SNARKs and Truebit and Plasma.
And Plasma is this class of technologies that enable you to have less decentralized platforms sitting at layer two in the Ethereum ecosystem. They can benefit from the full trust in some cases — sometimes they benefit from partial trust — but if they’re linked in really rigorously, they can benefit from the full trust of the base trust layer, and you can get the best of both worlds.
Watch the full interview with Joe Lubin:
So, you get high transaction throughput per second, and you get the security of the base layer. And by that I mean, if you have a game and you brought your own network for your game or your exchange or some other application, if they have assets on your system, everybody using your system can be confident that, if you’re incompetent or if you’re corrupt, it doesn’t matter so much. It’s a pain in the butt, but they can still pull your value tokens back to safety and you’re not vulnerable. So, that’s happening.
So, I think we’re at many tens of thousands of decentralized transactions per second on the Ethereum network right now. And another point that I believe she was making, and that I think Ameen was making, is that we’ve got all this scalability for specific use cases.
So, we’re not reaching any limits soon with the base trust layer at 15 to 27 transactions per second, but the base trust layer within 18 to 24 months is going to multiply its capacity by about a thousand times.
That development is Serenity, or Ethereum 2.0. And Ethereum 2.0 is divided into four phases: three major phases — and in computer science terms, they’re numbered 0, 1 and 2. Phase 0 is getting close, it’s eight different groups that are building their own clients according to a specification that’s really very stable right now, a bunch of different testnets that each uses and there’s one testnet for everybody to come together.
So, within a small number of months, we should have a fully operational testnet and possibly by the end of this year, we’ll have a fully operational real Phase 0 Ethereum 2.0. So, good chance it’ll go live this year.
There’ll be different ways that it gets connected with Ethereum 1.0: ether tokens will move from Ethereum 1.0 to Ethereum 2.0, there may be bidirectional mechanisms, and there may be a way in the not too distant future to use the Beacon Chain, which is basically the Phase 0 proof-of-stake finalized blocks on Ethereum 1.0.
A proof-of-stake future
OC: Okay, so you mentioned proof-of-stake and I wanted to ask about another point from yesterday that was sort of contentious with the panel about proof-of-stake vs. proof-of-work. I know Ryan Selkis from Messari was sort of critiquing proof-of-stake.
JL: So, I don’t know that he was critiquing proof-of-stake. The question that was put to him about having a certain amount of money to invest in either Bitcoin or Ethereum 2.0. He said that he would put 80% or 100% on Bitcoin, because Ethereum 2.0 isn’t released yet. There’re still questions and he has children.
I don’t think he was fully discounting proof-of-stake, I think he just knows that it has been proven that proof-of-work works.
And so, if he was faced with the conservative decision of investing his child’s college fund, he would make the prudent choice. That is kind of the choice we made on the Ethereum project at the start, we intended to go proof-of-stake.
Unlike what was said on that panel, there are proof-of-stake systems that are working — different flavors of proof-of-stake systems. But we were aware of edge cases in all of the systems that were working at the time that could potentially take down a network.
Those systems weren’t incredibly valuable, and we figured that if the Ethereum network is incredibly valuable, then well-resourced actors would potentially exploit these vulnerabilities.
So, we knew we could make proof-of-work work, and the intention was to do that, do the research and get to the point where we were very confident in proof-of-stake — and that is done.
OC: Could you summarize why it’s so important to move to proof-of-stake?
JL: Proof-of-work is a mechanism that keeps all the different nodes of a network in sync. So, it’s a consensus formation mechanism. You get the trust characteristic from blockchain, from having all these nodes kept in sync.
Proof-of-work is one class of consensus algorithms — they all, essentially, find a leader and everybody follows in behind that leader. And this is a brand new one, it’s a decentralized mechanism where you don’t really elect a leader, the leader wins its role and wins the right to propose the next state of the system by showing everybody the next block that’s valid. Then, everybody validates that and crypto economics causes them to all fall into sync.
But proof-of-work, unfortunately, requires very expensive custom hardware, enormous amounts of electricity and wastes huge amounts of computation, and it benefits efficiencies of scale. So, if you’re a well-resourced actor, you can have an unfair advantage over someone running it on their game machine at home.
Proof-of-stake fixes all of that, proof-of-stake trades all that expense for a crypto-economic bond — essentially ether [ETH] — that you put into a smart contract on Ethereum. It burns orders of magnitude, less electricity, so you’ll be able to run it on your pad or phone at some point pretty soon, or some jewelry at some point in the not-too-distant future.
It doesn’t waste a lot of computation. It has very low barriers to entry, so my sister could do it or somebody could set up a warehouse, and my sister wouldn’t be disadvantaged compared to that warehouse — because, essentially, it’s probabilistic in terms of how much you’re called on to participate, depending on how much you’ve invested.
So, it’s a more secure system and a fairer system — more equitable. Because it’s based on probabilistically selecting validators for each new block, you can have a single validator pool for many different sharded blockchains. Right now, we have a single validator pool that keeps Ethereum’s blockchain secure, so all the validation power is focused on that one blockchain.
Split all that validation power into 1,024 different shards that would weaken all the different shards and people would notice that shard number 37 is really weak and these other shards would gang up and it would be madness. But from this one validator pool in Ethereum 2.0, groups are selected and randomly allocated to validate the different shards, so all the shards are secured equally and they’re all secured with the full validation power of the entire network.
Ethereum for enterprise
OC: I also wanted to touch on the debate between public and private blockchains. As we heard on another panel, representatives from EY and ConsenSys were both arguing for using Ethereum’s mainnet, a public blockchain, for large enterprises.
JL: We do a huge amount of work in our solutions group and we’ve built lots of enterprise blockchains, private permissioned blockchains for companies and for consortia, and banks and central banks. And you absolutely need to build the right architecture for each use case. There aren’t a lot of use cases on public blockchains right now that are appropriate for enterprise use cases, enterprise solutions.
One of [ConsenSys’] John Wolpert’s arguments is that Ethereum will be the base trust layer, the base settlement layer that many different sidechains and other technologies will link into. We’ve got a group called Aztec that built a protocol that enables obfuscation of transactions on the public Ethereum.
The Aztec protocol is super cool, and it will be live on public Ethereum pretty soon. That’s very similar to what Ernst & Young [EY] built, so [EY’s] Paul Brody described Nightfall, which also enables the shielding of public transactions on public blockchain.
Essentially, the public Ethereum isn’t fully ready for primetime — for all use cases — because it’s not scalable enough yet and because it doesn’t have sufficient privacy and confidentiality for all use cases yet.
We’re solving privacy and confidentiality by using private networks that can link into the public Ethereum or link into each other. We’re also solving it with those two protocols that I just described, so many different classes of transactions or use cases can now, or soon, be done on the public Ethereum. And we’re solving scalability via layer two and moving to Ethereum 2.0.
OC: Awesome, that’s really great. Thank you so much, really appreciate it.